Alantra raises €132m to target Spain’s real estate financing gaps

The pandemic may have slowed down fundraising processes, but it has not prevented Alantra from raising €132 million for its first property debt strategy, Real Estate Capital Europe can reveal.

Around 18 months since the start of its fundraising process, the Madrid-based investment bank and alternative asset manager has held a third close of its Alteralia Real Estate Debt FIL fund and is near to reaching its hard-cap of €140 million. The firm predicts this target will be reached within the next few months, which will likely be the fund’s final close. A first close of the fund, on €30 million, was held in May 2020.

Jaime Cano, partner in Alantra’s private debt unit, said the company’s aim is to provide real estate financing “from core-plus to value-add projects”, with a focus on senior lending. “We have a very flexible mandate in which we will be providing loans at loan-to-values of up to 80 percent and a debt cost from 5 percent to 10 percent,” he told Real Estate Capital Europe. “The fund’s focus is on senior lending, but we will also be looking at providing subordinated debt.”

Alantra will aim to write facilities ranging from €5 million to €20 million, a part of the market that Cano argued is underserved by lenders, particularly in Spain.

“In the segment of tickets between €5 million and €25 million, there is not fierce competition in Spain,” he said. “The international debt funds are not present in this market segment due to these loans’ sizes, and banks’ increasing regulatory restrictions and conservative approach is leading them to further retrench from this space, leaving in turn a widening debt gap for us to fill.

“In some cases, we can be more flexible than banks in terms of loan-to-values, structuring and property types. Banks in Spain are now more cautious when it comes to providing hotel financing, for example.”

Although Alantra plans to deploy around 60 percent of the fund in real estate credit opportunities in the Spanish market, it wants to fund projects in other eurozone countries. Cano explained that, outside Spain, a focus on €5 million to €20 million transactions is also expected due to what the firm sees as similar financing shortfalls in some countries.

“We are very committed to also providing loans abroad,” he said. “We have analysed transactions in France, Germany, the Netherlands, Italy, Portugal and Ireland, and we have perceived funding demand from mid-market borrowers [in those markets].”

Cano added that Alantra plans to take a different approach to other European debt fund managers targeting smaller and mid-sized loans, which he said tend to be more focused on reaching double digit-returns: “They follow a bridge financing approach with a focus on short-term development finance.”

The firm is targeting a gross internal rate return of 7.5 percent to 8.5 percent. Cano said the fund’s investor base includes predominantly Spanish, but also international, insurance companies, pension funds, banks, family offices and high-net-worth individuals.

The lending strategy is sector-agnostic and Alantra will look at opportunities “on a deal-by-deal basis”, according to Cano. However, he added that the firm is looking with interest at offices, retail, hotels, logistics, student accommodation and the private rented residential sector. “These loans may be used for different purposes such as acquiring assets, refinancing existing debt or funding for renovation or repositioning works.”

Deployment capabilities

To date, Alantra has provided one loan from the fund, which is secured against a multi-asset portfolio comprising office, retail and logistics assets in Madrid. According to Cano, the firm is close to completing two more debt deals, in the logistics and hotels sectors.

Looking forward, the firm is confident it will find lending mandates since, according to Cano, the pandemic has expanded opportunities for alternative lenders. “Around 18 months ago we anticipated there would be many lending opportunities in this market segment. But now we have realised the opportunity is huge.” He added that, while quietly fundraising for the fund, around 300 unsolicited transactions valued at an aggregate €6 billion were put in front of his team.

Cano said that, although the market for small to mid-sized loans is an attractive playing field, it requires lenders to have in-house origination teams to cover different jurisdictions and interact directly with local players.

“The international debt funds active in the Spanish real estate market are not covering it as we do since they don’t have our local presence. They are following the market from abroad, from other jurisdictions, which makes it more difficult for them to find local opportunities for small-to-mid sized opportunities on the ground.”